It is hard to believe, but it is January and that means it is time to begin to think about preparing your 2012 tax return. The Internal Revenue Service has not yet announced a date as to when their systems will be able to accept tax returns, but that doesnít mean that you canít get a head start on the process.
January is an important time to gather your information. Various third parties are required to submit information, such as income and expenses, to the Internal Revenue Service. Most of these information returns will be sent to you by the end of the month. Examples of these are W-2 forms, Form 1099-INTís from banks, Form 1099-DIVís from brokers, and Form 1098ís from lenders. Organization is key when it comes to preparing an accurate tax return. As you receive these reports, create a tax file or a designated location which will be used to accumulate all of the data. This will simplify preparation, as everything will be in a central location.
Another task that you can do now to speed up the actual preparation process is to review your check register. As you are reviewing, highlight entries for medical expenses, which could be deductible if you itemize and exceed the 7.5% adjusted gross income threshold (this will change to 10% for 2013). It may also be helpful to make a call to your pharmacy for a total spent on prescription drugs for the year. Charitable contributions are worthy of notation, as well. Be sure you have evidence to support these charitable deductions, such as acknowledgements from the charity. And donít forget payments made for taxes: real estate taxes, school taxes, estimated federal, state, and local taxes, and tax balances due in prior years. Locate any receipts that apply to these deductions and keep in your tax file marked 2012.
Lastly, take a few moments to look over your previous yearís tax return to see if any other income or deductions may apply for this year. If so, take the steps needed to obtain the information needed to support them. Also, familiarize yourself with any new rules for 2012 that are applicable to you, as well as the tax program that you will use to prepare your return, or begin a relationship with a tax professional.
Taking these steps now will lead to a less stressful tax preparation experience later. Itís not too early to be thinking about the April 15th deadlineóit will be here before we know it!
Shana R. Kennedy is a Certified Public Accountant with Baer and Company of Morgantown. Questions and comments to Shana can be directed to Shana@BaerAndCompanyCPAs.com
Disclaimer Ė Baer and Company of Morgantown advertises with Journal Register Co. publications.